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Since its founding in 1975, Vanguard has established itself as a powerhouse in the world of investment management. Known for championing low-cost, tax-efficient investment strategies, the company has helped millions of individuals take control of their financial futures.
While Vanguard is most commonly associated with its trailblazing index funds and ETFs, it also offers investors exposure to alternative assets—including precious metals.
With such a strong reputation and a wide range of investment products, it’s only natural that many people are curious: can you actually invest in physical gold or silver through a Vanguard IRA?
Here’s what you need to know.
Before we get started:
Inflation and rising interest rates has destroyed many people's savings. Many investors feel defeated and helpless, but you can fight back.
Gold and other precious metals have been used to protect against inflation for thousands of years. And when you hold physical in a tax-protected savings account, it gets even better.
Opening a gold IRA can sound complicated, but it's really not.
That is why we created a list of our most trustworthy investment companies, to make comparing and choosing the company best suited to your needs as easy as possible.
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About Vanguard
The Vanguard Group, Inc. is an American-registered investment advisor offering a wide range of investment products, including mutual funds, ETFs, and retirement accounts.
The company has more than $8 trillion in assets under management and is one of the largest providers of low-cost index funds. As of 2022, it had 204 U.S. funds and 206 international funds.
Based in Malvern, Pennsylvania, this private company is owned by the funds it manages and does not have outside investors. Thus, the shareholders are the actual owners of the company and benefit from lower fees than those charged by other fund companies.
Experts believe that this structure allows it to avoid conflicts of interest, instead focusing on providing strong returns for its clients.
Precious Metals IRA Overview
Unfortunately, Vanguard doesn't offer a Gold IRA directly. However, individuals interested in precious metals can invest in the Vanguard Global Capital Cycles Fund (VGPMX).
Formerly known as the Vanguard Precious Metals and Mining Fund, VGPMX is a mutual fund that holds a variety of stocks from gold, silver, and other precious metal companies. The fund invests in U.S.-listed companies engaged in the exploration, development, production, or marketing of metals such as gold and silver.
VGPMX allows investors to access the precious metals sector without purchasing individual stocks, coins, or bars. It provides diversification across different types of companies so investors can benefit from exposure to the entire precious metals industry.
The fund is actively managed with a long-term view and has an expense ratio of 0.05%, meaning it is one of the lowest-cost options in the sector.
Protect Your Retirement Savings from Inflation & Taxes!
Is VPGMX a Better Option?
As earlier stated, Vanguard is a private company owned by its funds. They are more interested in providing the safest, low-risk, profitable ventures for their clients than just storing wealth. VPGMX being a mutual fund, has yearly returns in the form of dividends, which precious metals stored in an IRA do not have.
Moreover, investing in VPGMX instead means investors won't have to pay storage fees, custodian fees, or commissions when they purchase gold. This makes VPGMX a viable option with lower upfront costs than buying and storing physical gold in an IRA.
For Those Interested in Gold IRA
There are Vanguard alternatives for individuals that want to save and grow their retirement funds through Gold IRAs. Some reputable companies include:
Precious Metals IRAs
If an investor wants to hold or back up their retirement savings using physical gold or other precious metals, they'll have to create a special separate account known as a Gold IRA. They are self-directed - meaning the investor must make all decisions regarding what assets go into the account.
How They Work
Gold IRAs work pretty much like a standard individual retirement account (IRA), but instead of investing in stocks and bonds, you invest in physical gold or other precious metals. Just like a regular IRA, any earnings on your investments are tax-deferred until you make a withdrawal.
Gold IRAs can also contain gold stocks (the part that Vanguard's VGPMX focuses on), that is, shares of gold mining and production companies, gold ETFs, and gold mutual funds. In other words, instead of holding physical gold
The Gold IRA account is used to purchase and hold the rights of ownership of gold which is owned by a third-party custodian.
How to Invest in this Retirement Account
If an investor wants to store and grow their retirement savings using a precious metal IRA, the first step they'll have to take is to open a self-directed IRA with a financial institution that specializes in providing such accounts.
This financial institution is also responsible for holding the Gold IRA account. Next, they will need to pick a custodian who is legally responsible for holding and protecting the precious metals within their vault or depository.
Once established, investors can start researching what precious metals they want to purchase as well as decide how much money to allocate toward each of them.
The financial institution that they've chosen to work with or their custodian can help them pick out trustworthy and reliable brokers to facilitate the purchasing process.
The next step is to fund the account. They can do this through direct transfer or rollover from their existing retirement account, such as a 401(k), 403(b), or 457.
Some people also use cash to fund their Gold IRA; however, the IRA places limits on the amount of money an individual can contribute each year. For instance, if an investor is younger than 50 years old, the annual contribution limit is $6,000. If older than 50 years old, they can fund their account with up to $7,000 per year.
The last step of the process is the actual purchase of precious metals. This is where the broker comes in. Investors must thoroughly vet and research brokers before settling on one, as they will be responsible for purchasing the metals.
The IRA must also make sure that the chosen broker meets their criteria for quality and trustworthiness, e.g., their gold must be at least 99.5% pure and silver at least 99.9% pure.
The Process of Making Withdrawals
If an investor feels like it's time to start reaping the rewards of their Gold IRA, they can initiate a withdrawal. The IRS will tax them at their ordinary income tax rate, just like with the standard traditional retirement accounts.
There are also required minimum distributions (RMDs) that an investor must meet, depending on their age, the value of their account, and life expectancy.
For example, if an investor with a life expectancy of 100 years is 78 years old and has $100,000 in their Gold IRA account, the IRS will only allow them to take $4,545.45 per year. (This value is obtained by subtracting 78 from 100 and then dividing $100,000 by the resulting answer.)
If an investor wishes to take out more, they will be subject to a 10% tax penalty. However, if the funds are transferred directly to another qualified retirement account or are used for educational expenses, the taxes and penalties won't apply.
Types of Accounts
There are several types of precious metal IRAs that an investor can choose depending on their goals, budget, and risk appetite. A few of the most common types are:
Roth gold and silver IRAs are post-tax accounts in which taxes are paid upfront. This tax model allows investors to withdraw their funds tax-free when they reach retirement age.
Traditional gold and silver IRAs are pre-tax accounts in which taxes are paid when the investor takes out funds from their account. While there is no upfront tax burden, withdrawals are subject to ordinary income taxes.
SEP (Simplified Employee Pension) gold and silver IRA accounts are designed for self-employed individuals or small business owners who want to contribute towards their retirement savings.
They allow contributions of up to 20% of net self-employment income with a maximum annual contribution limit of $66,000 per year.
Benefits of These Accounts
The rising interest in precious metal retirement accounts is mainly due to their ability to protect investors against inflation. When the dollar loses its value, gold and other precious metals tend to remain stable and, sometimes, increase in value.
This helps to preserve the purchasing power of investors' savings over time, even during periods of economic downturn and currency devaluation.
Unlike traditional retirement accounts, Gold IRA accounts are not subject to stock market volatility. An investor buys actual gold or silver and stores it in a secure location. Things like market crashes and economic downturns don't affect the value of their assets.
This makes Gold IRAs a great way to diversify your retirement portfolio and protect your hard-earned money from inflation.
Precious metals are rare and have real industrial applications. For example, gold is used to make jewelry and electronic circuits, while silver is used to make solar panels. Palladium and platinum are used to make catalytic convertors, and palladium is also used in dental alloys.
As these metals become rarer and their industrial applications increase, their value is likely to rise as well, making them an excellent long-term investment option for retirement planning.
Lastly, Gold IRA accounts are also a great way to pass on wealth to heirs. When an investor passes away, their family can receive the assets from the account tax-free and without having to go through probate court using a provision known as a "stretch IRA."
Furthermore, if the account is managed properly, any gains from it will not be subject to taxation until they are withdrawn.
Special Considerations When Investing
Saving and growing wealth using precious metal IRAs involve the purchase and storage of the actual physical metals. As such, an investor must find IRS-approved companies from the account manager to the depository.
Additionally, an investor must consider the associated fees when selecting an account manager or custodian. Fees can range from setup costs, storage fees, annual expenses, withdrawal charges, audit fees, and more.
Some companies may include these fees, while others may charge them separately, so it's important for investors to do some research before deciding on which company will best fit their needs and budget.
Investors should also be aware of the tax implications associated with their accounts. In particular, traditional IRAs are subject to taxation upon withdrawal, and distributions from SEP IRAs are taxable income.
Essentially, the cost of running and maintaining these accounts, plus taxes that they may be subject to, should not outweigh the potential benefits of investing in them.
Lastly, even though most precious metal IRA companies allow people with at least $100-$300 to open accounts, a large deposit may be more beneficial in the long run.
Bigger investments can help investors accumulate assets faster and also reduce their storage costs, as these are usually calculated on a percentage basis of an account's total value.
Gold ETFs Vs. Physical Gold
Gold ETFs track the price of gold and trade on stock exchanges like regular securities. They let investors gain exposure to gold without dealing with the storage, insurance, or logistics of owning physical gold. Prices move in near real-time, making them easy to buy and sell.
However, investors don’t actually own gold with ETFs. In the event of fund default or insolvency, they may lose access to their investment. ETFs can also come with fees and taxes not associated with physical gold.
Physical gold, available as coins, bars, or jewelry, is a tangible asset that doesn’t rust and can be traded globally. It offers the security of holding something with intrinsic value but requires finding a trustworthy dealer and secure storage. It earns no interest or dividends, so profit depends entirely on price appreciation, timing, and market conditions.
Conclusion
Investing in precious metals, be it in ETFs, IRAs, physical gold, or other forms of bullion, can be a profitable endeavor. However, due to the various options and implications that come with each type of investment
investors need to consider their individual needs and goals before committing their hard-earned money. Vanguard Group Inc. can help investors navigate these decisions and make educated investment choices that suit their financial goals.
Remember to read our list of the Best Gold Investment Companies to work with, before investing your hard-earned savings!
>> CLICK HERE to read our list of the Top Gold IRA Companies. <<
Or, if you like what you read about Vanguard Gold IRA, continue to their website below.
Charles Turner
Hi, I'm Charles Turner, founder of Turner Investments. I created Turner Investments to provide education and guidance to individuals interested in personal finance.
My goal is to make Turner Investments a valuable resource for anyone looking to learn more about personal finance and make smarter investment decisions.